Form 8606 – Line 6 Entry
I understand that Form 8606 is used to track the basis (i.e., non-deductible/after-tax contributions) in a traditional IRA. OK. However, if several IRAs are owned and only one of those has a “basis”, it would seem logical that Line 6 would only be the value of the IRA with a basis. Why is the combined value of all IRAs used on Line 6 if only one has after-tax contributions?
Permalink Submitted by Alan - IRA critic on Tue, 2024-02-13 18:15
Non deductible contributions apply over all IRA accounts, they are not assigned to the particular IRA that received the contribution. IRAs are “aggregated” for both tax rules and RMDs, with all IRA accounts treated as one combined IRA account. As such, transfers and rollovers between various IRA accounts has no effect on Form 8606 and there is no tax reason to maintain separate IRA accounts. If you have IRA basis it also does not matter which IRA account you take a distribution from just as it does not matter which account you made a ND contribution to.